Question :
41) Assume that households have positive wealth. As the interest : 1381514
41) Assume that households have positive wealth. As the interest rate ________, nonlabor income ________ and current consumption ________.
A) decreases; decreases; increases
B) decreases; increases; decreases
C) increases; increases; decreases
D) increases; increases; increases
42) At the beginning of 2013, Albert planned to buy a new home theater system, laptop computer, and hybrid car by borrowing money. Albert already owes $9,000 on other loans. He also planned to buy a new iPod and humidor out of current income. A decrease in interest rates during 2013 will most likely
A) cause Albert to decide to borrow less money, but not change what he planned to spend on goods purchased with current income.
B) cause Albert to decide to borrow more money and to spend more on goods purchased with current income.
C) cause Albert to decide to borrow more money, but not change what he planned to spend on goods purchased with current income.
D) cause Albert to decide to borrow less money and to spend less on goods purchased with current income.
43) Assume that Krystal has positive wealth. As the interest rate increased, Krystal increased her current consumption. For Krystal
A) the substitution effect of an interest rate increase outweighs the income effect.
B) the income effect of an interest rate increase outweighs the substitution effect.
C) the substitution effect of an interest rate increase must be zero.
D) the income effect of an interest rate increase must equal the substitution effect.
44) If an individual is a debtor, an increase in the interest rate
A) increases current consumption.
B) decreases current consumption.
C) has no effect on current consumption.
D) will either increase or decrease current consumption depending on the size of the income and substitution effects.
45) Assume that the income effect dominates the substitution effect. When wages rise
A) people will work more hours.
B) people will work fewer hours.
C) people will work the same number of hours.
D) the effect on the hours people work is ambiguous.
46) Assume that the substitution effect dominates the income effect. When wages fall
A) people will work more hours.
B) people will work fewer hours.
C) people will work the same number of hours.
D) the effect on the hours people work is ambiguous.
47) A decrease in consumption and an increase in labor supply would result from
A) a decrease in tax rates.
B) a decrease in transfer payments.
C) an increase in transfer payments.
D) an increase in government spending.
48) Which of the following causes a decrease in labor supply?
A) when wages and the price level decrease proportionately
B) an increase in income tax rates
C) an increase in the general price level
D) an increase in transfer payments
49) Which of the following factors is one of the determinants of a household’s budget constraint?
A) prices
B) income
C) wealth
D) all of the above
50) Empirical data suggest that during recessions, individuals ________ their consumption of durable goods.
A) increase
B) reduce
C) do not change
D) eliminate
